Japan's top banks forecast tough year

Image caption Japanese banks are trying to gain market share abroad from troubled European banks

Japan's biggest banks are expecting a tough year ahead with two of the top three forecasting falls in profits.

Mitsubishi UFJ, Japan's biggest lender, said it expected net profit to fall to 670bn yen ($8.3bn; £5.2bn) in the year ending March 2013, a drop of 31.7% from the previous year.

Sumitomo Mitsui Financial Group said it expected a 7.4% drop in profits.

Analysts said tough domestic conditions meant demand for loans could be dampened in the future.

The banks are also not expecting to see major gains from government bond trading that have boosted profits in recent years.

Shares in Mitsubishi UFJ fell 1.4% on Wednesday while Sumitomo Mitsui Financial Group shares dipped 0.3%.

However, shares in Mizuho Financial Group ended 1.8% higher. On Tuesday, it forecast that it would see net profit rise 3.2% to 500bn yen in the current financial year, which was better than analysts' expectations of 374.2bn yen.

The forecast rise is mainly due to an expectation that Mizuho's investment banking arm will become profitable in the current year after reporting a loss last year.

For the financial year ending March 2012, Japanese banks were able to post solid profits, as they took market share from European banks in emerging markets.

The banks were further boosted by trading gains on government bonds as well as the rise in equity markets in the fourth quarter.

On Tuesday, Mizuho reported net profit of 484.5bn yen, up 17.2% from a year earlier. Profits at Mitsubishi UFJ jumped 68% to 981.3bn yen, while Sumitomo Mitsui's profits rose 9% to 518.5bn yen.

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